On Internet Business

Raising funds for business ideas

Posted by Michael under Business Growth, Entrepreneur Resources, Leadership

Kickstarter’s platform has got a lot of attention recently, as it exposes different forms of innovation: there’s the creative ideas that are seeking funding, and then there’s the way that the ideas are being funded – Kickstarter is a testing ground for ways to raise funds. The ideas that don’t get funded might be bad ideas, or they might be approaching funding in bad ways. Every entrepreneur can learn from the Kickstarter successes – and failures!

Funder fatigue

Some Kickstarter projects have had fantastic funding success, but increasing levels of unhappiness on social networks show that the same potential funders are getting hit, again and again, for funding and that they are becoming fed up with unsophisticated approaches from the website.

The problem is that if a product can’t communicate its values well, it’s doomed to failure, whether it’s a new toaster, a new band or a new b2b service. By this logic, failed Kickstarter campaigns are all about failing to convert potential audience to actual backers and that comes back to the classic question – how do you close the deal?

What potential Kickstarter funders resent

Being hit again and again (nagging)

If you hit the same potential funders as everybody else, you are likely to fail. First, they are probably recoiling from somebody else’s botched proposal or wrapped up in somebody else’s successful pitch – neither scenario bodes well for your approach. Second, even if they haven’t heard from you before, they will have heard from many others, quite a few of whom are like you – you’re competing with everybody for a little bit of something.

Alternative – what about asking other funding sources? It’s difficult to find new funding opportunities, but if you do, you’re likely to find a more receptive audience and one that is judging your idea and you, with a fresh perspective. And if you can’t find fresh funders, maybe you haven’t researched at depth? Consider whether you can ask potential funders to point you towards other funders – sometimes that request for a referral, rather than funding, has the paradoxical effect of getting you an enthusiastic hearing.

Unrealistic funding objectives/Padding of funding

Your potential funders should, and probably do, have a very clear idea what it takes to get a project/idea/business off the ground. When a funding request contains unrealistic amounts or unclear objectives big red distress flares go up for both seasoned dragons and enthusiastic friends and family.

Alternative – don’t just research your idea, research similar ideas and the costs entailed in getting them off the ground. If you can demonstrate the need for expenditure and that you’ve pared the unnecessary out of your approach, you stand a fair chance of getting funded.

Begging (last minute pleas and drama as the deadline approaches)

While deadlines add energy to business-based funding appeals, they can also lead to histrionic behaviour. Emails begging people to give £10 or $20 because if ‘fifty of you do, I can still make my dream come true’ sap the goodwill of the donor and make a nonsense of the project. The minute you ask for charity, you’re admitting that your business idea is an empty well down which you’re asking people to throw their hard-earned cash.

Alternative – set up the last minute first. Approach your last-step donors and get a commitment from them that if you get 80% of the money, they will give the final few % in the last seven days. Don’t rely on this cushion though, instead try to raise 100% and give yourself the last 7 days to go back to agreed funders and show them that your project is oversubscribed: a year or couple of years down the line, you can call on that cushion to expand your business or even fund another business idea.

New approaches photo by Office Now

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Economic slow-downs around the world but shopping on the increase?

Posted by Michael under Business Growth, customer service, Entrepreneur Resources, Online Retail

From the beginning of July there have been concerns expressed over the pace of the UK’s economic recovery after evidence that the manufacturing sector in Britain is growing at the slowest pace for nearly three years.  Ireland’s manufacturing industry is shrinking and the economic boom in China is also dropping in pace. While the UK is not reversing direction or even stagnating, the healthy expansion seen earlier in 2011 is definitely on the decline.

However, while the making of things might be dropping, the buying of things is still growing, as in the space in which things can be bought! The top ‘retail destinations’ in the UK – London, Glasgow and Birmingham are about to be joined by Leeds, where a vast circular shopping centre is under construction. As property developers continue to invest in massive retail parks and shopping centres, UK high streets are seen as being under threat and in decline. Many familiar names have vanished in the past two years: Woolworths, Jane Norman and Habitat from city centres and Focus DIY from out of town shopping parks. So what makes speculators confident that big shopping venues will continue to thrive?

Retail analysts believe that three forms of shopping will grow in the next few decades:
1.    Diversity shopping – shopping with added extras; shopping centres with open markets attached to them are proving particularly popular, especially if the markets have theme days such as ‘organic’ or ‘local’ or events like chocolate festivals, beer fests or Christmas fairs
2.    Super centres – the bigger the centre, the more scope it has for appealing to the entire family: shopping with bowling or trips to the cinema added in, dropping of the kids for swimming or karate lessons while you buy the groceries, or mall walks for senior citizens that finish with a cup of tea and biscuit in a café – all currently bringing in multi-generational shoppers on a daily basis
3.    Online retail – the biggest growth centre for many retailers has been online shopping: the recognition that customer service is key to good online retailing has changed the internet-based marketplace and driven standards up so that many online retailers have the same kind of reputation in virtual reality as high street shops once had through word of mouth.

The high street isn’t extinct, according to Anna Smee, director of business strategy at Hundred Consulting, rather it’s evolving, ‘… [it] has undergone a huge transformation in recent years, which is a result not just of the recession but the growing momentum of online shopping. We are seeing a shift back to specialist, often owner-managed retailers that offer a high level of personal service or an unusual mix of products that are not available in the big retail outlets on the outskirts of the UK’s towns and cities.’ And that could mean that the next Habitat or Woolworths will begin trading online, with a market stall that travels around big shopping centres, and builds a reputation for exceptional service before expanding through franchise or other entrepreneur-led systems to create a business empire based on an intensely personal experience for both shopper and shop-owner.

High street shopping courtesy of Maxwell Hamilton

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Managing appreciation in business

Posted by Michael under awards, Business Growth

An article by Gillian Hasley, eBusiness Manager at Monster UK, suggests some ways of demonstrating appreciation and support for staff without necessarily getting into classic incentive and bonus systems. It could be said that her solutions are somewhat simplistic but they do at least offer different ways of thinking and that’s vital in a recession when any organisation needs to balance the need to recruit and keep the best staff, while ensuring that spend on personnel issues is not excessive.

It’s a fact that incentives work: psychological studies have revealed that employees who receive a reward for their efforts will make continued future efforts and will tend to stay with their employer longer. Similarly, we’ve all heard staff who gripe and grumble about their employer and can’t wait to get away. Not only does the company lose those people, they infect others with their discontent and create a bad reputation for the organisation.

‘Thank you’ or ‘well done’?

Saying thank you is nice but saying well done is better. At a basic level, ‘well done’ encourages the individual, team or department to explore, explain and expand on what they did well – this makes them more likely to repeat the behaviour, makes others more likely to copy their actions and drives transferable skills through the organisation.

Match rewards to culture

In a formal business, having the CEO high-fiving the staff around the water cooler is not likely to boost company morale, while in the creative industries this is likely to create a warm fuzzy glow in all concerned! Getting the reward to fit with company culture is important or it can alienate key staff.

I happened to be at a charity fun-run recently and overhead a team from a major UK bank complaining about the thank you lunch that had been laid on for their department – some were women who were dieting for their summer holiday bikinis, others were undertaking a cultural fast day when the buffet was organised and another group were training for a marathon for charity and as a result were eating carefully as they were undertaking a long run that day. In all, from what they said, nearly a third of the hundred-strong department had felt that they were excluded in some way from enjoying the meal. From their grumbling they felt unrecognised and isolated, as if ‘they didn’t fit in’ or ‘weren’t part of the team’ – the opposite effect to the one intended.

Creativity can be its own reward

Asking your employees to suggest a reward system can be the best way to reward them! Designing their own rewards is an incentive in itself and gives those who don’t ‘win’ a feeling of being involved and included, as well as those who do. Be prepared for whacky suggestions and to explain why good ones are too expensive to fund: that too can build team spirit, because understanding why they can’t have what they want might encourage people to strive harder to improve business profits.

Explore IT

Many organisations fail to see what they already have in terms of incentive infrastructure. Risk can become endemic in businesses that run incentive packages for senior staff, as trying to ‘win’ the higher compensation levels leads to misconduct or risk-taking. Using IT systems like intranet and regular posting of returns from departments can allow everybody to scrutinise behaviour as well as results, allowing risky practices and potential frauds to be spotted by others working in the same area, who are most sensitised to unusual patterns in business.

For small scale rewards that improve business performance, consider setting up quizzes on the intranet or other work-based systems such as business apps for mobiles to ensure senior managers are up to speed on mandatory requirements and all staff are aware of changes to legislation or business practice. These little tests can have little rewards – a printable ‘free lunch’ ticket or an hour’s Time Off In Lieu: small gains that can really encourage people to invest in best practice.

Bilingual thank you cakes by clevercupcake

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Starting a business in a recession

Posted by Michael under Business Growth, Entrepreneur Resources, Leadership

A serial entrepreneur, Jenn Hauser, offers five tips to starting a new business over at Inc.com. A major insight into the entrepreneurial mind is the way that she constantly comes up with, and discards, business ideas – it’s not a ‘perfect idea for the rest of my business life’ approach but a constant thinking up and letting go of potential businesses.

Once an idea starts to take hold of her, she sets to work on it. But what does it mean to convert an idea to a viable start-up and how is it done? Her tips include:

1.    Take a step, any step – don’t allow an avalanche of planning to crash down on simple action. Whether you begin with sorting out financing, writing out a product description or checking out the competition, you’re making a start and any start leads organically into the process of business creation. It’s not so important where you begin, as that you begin.
2.    Keep it simple and forget perfect – here the message in the article is slightly confused, I think. What Hauser says is that you need to find the key point of the business idea and forget all the frills around the edges. It’s not always easy to pick out the key point though, and sometimes the frills are what makes all the difference – simplicity is great, as long as it doesn’t miss identifying the key advantage or USP that makes your business idea niche or viable if the marketplace is already crowded. Work out what’s key and forget perfection and you’ll have something to run with.
3.    Don’t reinvent the wheel – here Hauser is right on the money. Too many start-ups think they have to start everything from scratch. Look at what you can rent, lease, or use without starting from the ground up.
4.    Tell people you’re starting – of course, you don’t want to give away your great idea, concept or niche, but you don’t have to. You can simply talk about the process without talking about the ‘product’. As you talk to people you start to network – they know somebody who can help or who might be interested in what you’re doing. They offer their own experience, ask questions that help you refine your approach and maybe even suggest contacts or competitors for you to look at.
5.    Tell people what you need – Hauser suggests that when you’ve told people what you plan, you should tell them what you need – this is a good idea but it could, if you’re not careful, turn off your contacts. Don’t be needy. Say what you’ve already got before mentioning what would help. And remember that when somebody tells you what they are doing, you may be able to help them and should offer. Two way streets get more traffic!

It’s interesting to look at these start points in relation to a new study by the Kauffman Foundation that suggests American start-ups have fewer employees when they launch and stay smaller than before. ‘…businesses have been starting smaller and growing less for the last several years,’ said one of the researchers. It means that the job deficit is not being addressed by the start-ups in the way that it was before 2007 and that although the level of start-ups has held steady or even edged up since the recession, when including new employer businesses and newly self-employed workers, the research suggests it did not grow enough to generate the new jobs needed to support overall economic growth in the USA.

This may mean that more and more of us need to become entrepreneurs, running small enterprises even on a part-time basis, and that getting started may be the key to personal success and fulfilment as well as business and economic prosperity.

start-up diagram by dgray_xplane

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SeedSummit standardises Term Sheets

Posted by Michael under Business Growth, Entrepreneur Resources

For any entrepreneur, it’s important to review term sheets thoroughly. But for first-time entrepreneurs and those who are already deep into their new venture, the time it takes to master the contents of a term sheet can put a brake in business development.

Term sheets are non-binding templates used to shape more detailed legal documents that will determine the terms of an investment. Usually term sheets are required for seed investment used to undertake research, develop a prototype or conduct market tests on a new product.

So SeedSummit, a Seedcamp forum, has brought together 21 European investors to create ‘reader-friendly’ umbrella documents that are intended to reduce the lead time on completing investment deals, cut legal costs and provide transparency.

The underlying ideas are to create efficiency in funding, allow like-for-like comparisons and underpin an integrity level that could lead to later standard setting across national boundaries in Europe. The documents are the SeedSummit Term Sheet and the Enterprise Investment Scheme (EIS) variant which is specifically designed for the UK marketplace and both are being viewed by Seedcamp as the prototypes for a further development of more complex legal instruments, building on the original American term sheets agreed in 2009.

SeedSummit says, ‘We hope these documents help bring coherence to the …European market. By bringing the players to reach a common agreement for the benefit of the entrepreneur we hope to save entrepreneurs time and money and to ensure that the limited funds they are raising are used for the most important thing: building product for their customers.’

Interestingly, none of the business accelerators (early stage development programmes that offer mentoring on an in-depth level – often with competitor start-ups working with/against each other in parallel with the mentor – plus small and tightly focused amounts of equity-based funding), have contributed to the templates’ development which suggests the more traditional incubator systems are finding it necessary to shorten the time between idea spotting and investment to keep up with the incubator approach.

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Innovation for business survival

Posted by Michael under Business Growth

Over at Real Business, there’s an article about the role of innovation that’s worth considering in the current demanding economic climate. Quoting Carl Schramm, head of the Kauffman Foundation, it suggests that surrendering to imperatives can be the best way for a business, a country or an economic system to cope. It’s an heretical idea, the antithesis of what economists do and yet we know from decades of hard evidence that ‘planned economy’ is a synonym for ‘stagnant system’  Schramm’s argument is disruption and change are natural and innovation is their solution – not to ‘master’ change by overriding it but to manage it by riding it.

This feels wrong to established businesses: the ‘big beasts’ that have the power to influence politicians and to lobby decision-makers, but it’s worth examining. Propping up the status quo, as the Real Business article puts it, is futile. And if we believe that we live in an evolving world, where businesses, like organisms, find a niche and use survival skills to remain in it successfully, then the ‘ride the change’ approach makes more sense: it drives improvement by offering a range of ways to change things, some of which will work better than others and will therefore become the evolutionary norm. It changes the balance between risk and reward by making the facing of risk its own reward because of the value of innovation, while the current economic paradigm tries to hold by risk by focusing on the rewards already gained in the status quo system.

And it would mean that instead of total melt-down, big business had the chance to evolve from within in a crisis, by embracing innovation at all levels, not just top down, by rewriting the business DNA at the departmental level. Imagine a Royal Mail that delivered post on skateboards in cities, or a jobcentre that skyped interviews with claim benefits … by allowing innovation to flourish internally, huge organisations could evolve where they needed to and keep working structures as they stand.

Could it ever happen? In some firms it’s already standard, but for most of the big beasts, it looks like they will have to go the way of the dinosaur, and make way for smaller, faster-moving business entities.

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Six ways to benefit from the Bribery Act

Posted by Michael under Business Growth, Entrepreneur Resources, Leadership

From next month, British-based firms of every size will be facing the biggest shake-up in UK bribery law for over a century.

Whether you’re an SME or already a multinational, there are new forms of risk to assess and build into your business strategy. The most notable is a crime labelled ‘failure to prevent bribery’ which puts the onus on the business to prove that it has assessed the risk and implemented ‘adequate procedures’ to stop bribery being used within the company or by third parties acting on the company’s behalf. This crime leaves company open to fines that do not have a financial ceiling and also to the possibility of being barred from seeking government contracts.

While bribery may seem a remote issue to many firms, it’s important to recognise that the shape of the new legislation makes it a management concern and failure to implement good structures could lead to investigation and long-drawn-out interactions with the Serious Fraud Office or the Ministry of Justice. It’s also crucial to recognise that investigations are increasingly driven across national boundaries so a concern may be raised elsewhere in the world that is then acted on by a UK agency.

Dealing with the Bribery Act

Creating the right processes begins with business governance, and involves setting in place controls, ensuring there is a business culture of integrity and ensuring that individuals at the all levels in the organisation have been given training in values and behaviours that make the company averse to the risk of bribery.

1.    Start with a risk identification programme to find the areas of greatest risk
2.    Make sure you have a policy that is explicitly anit-bribery and that it is driven down from the top of the organisation to the bottom as part of induction, annual review and continuing professional development
3.    Create an anti-bribery champion at senior level who is able to challenge all levels of the organisation on their actions and their values. Resource this person effectively to carry out their role and create an annual reporting structure that is transparent to all areas of the business. A company intranet is a good way to do this.
4.    Check that existing contracts with consultants, directors and employees as well as outsourced areas all contain a clause prohibiting any form of bribery.
5.    Ensure HR can carry out good due diligence on new employees and that an effective form of due diligence is in place for partnerships, joint ventures and even funding sources.
6.    Give whistleblowers respect, anonymity and the chance to report concerns safely. Act on such concerns swiftly and with due concern for the anonymity of the person who raises them. Document the company’s actions in responding to concerns.

While such legislation can seem like a brake on business success, a good corporate strategy can use this kind of review to drive better understanding of values through the company, making integrity an aspiration, not a nuisance.

Image courtesy of images_of_money

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The environmental cost of the recession

Posted by Michael under Business Growth

Back in 2009, Europe-wide research showed that the recession had taken a chunk out of the ethical and ‘green’ retailing market with one in five shoppers claiming that their new financial position stopped them being able to environmental or ethical issues when making purchases. Interestingly, the focus on ‘green living’ was still increasing, with over 90% of those who responded saying they had taken up at least one ‘green’ behaviour in the previous 12 months – but ‘green’ shopping had fallen to a low place on their priority list.

Consumers cut back

12% of people had given up buying an environmentally friendly product that they used to purchase because they could no longer afford to pay the premium for it but 20% were still buying organic food even though they were trying to cut back on their food expenditure.

Eurostar rolls back

Against this background, Eurostar has announced that it will no longer be offering carbon offset passenger journeys – preferring to set the target of cutting emissions across its business by a quarter over the next five years. The company says that customers found the concept hazy and ‘didn’t get it’. While Eurostar claims that a Eurostar journey produces around a tenth of the CO2 of an equivalent flight between London and Paris or Brussels, it is struggling to roll out the carbon offset concept against the fierce price competition being waged by budget airlines which makes cheap flights an attractive option even for business travellers who find the free-for-all nature of getting a seat, food and access to toilets to be a strain on peak performance professionally.

High Streets failing

And the recent research by Colliers International showing that nearly 25% of town high streets are ‘failing’ is also leading to an environmental issue. The smaller, often less well-resourced businesses that take short term leases and sell cut-price or discontinued or bankrupt stock have a higher environmental footprint, less well-developed sustainability and environmental policies. They may even be selling products that lack proper supply chain audits: either imports from areas with lower human rights and environmental standards than usually seen on the high street or products considered below standard by the manufacturer but acquired for resale by ‘discount’ stores.

Finding new markets

It all adds up to an environmental bludgeoning which could lead to a backlash by consumers when the recession is over. But major retailers like Marks & Spencer are riding the storm by choosing to give less prominence to their environmental strategies in mass media PR while maintaining their focus by renaming such activities ‘efficiency savings’ and looking at new markets, like India, where the company has just opened a store in New Delhi.

Empty shop courtesy of egfocus

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UK businesses face employment and finance hurdles

Posted by Michael under Business Growth, Entrepreneur Resources, Leadership

This month has revealed the CBI’s newest analysis of the UK labour market, which claims to expose long-established structural problems which can inhibit business success and won’t be solved simply by overcoming the recession. The current unemployment figures 2.46 million will continue to rise through the year, according to the CBI, with a high of 2.6 million. The unemployment rate will then begin to fall, slowly through 2012. The bad news is that within that national position there are regions of long-term, entrenched unemployment and an overall skills shortage in certain key business skills.

The report suggests that these divisions in skill and supply, or from the social perspective, in quality and quantity of opportunity, will actually deepen as the recession fades. A key factor for those planning reform and growth is that the businesses sectors with greatest employment growth between 2004 and 2007 were also the ones with the steepest employment decline after 2008, which suggests a boom and bust phenomenon that could happen again unless some form of structural improvement is made.

NESTA sees trouble ahead

And in March a National Endowment for Science, Technology and the Arts (NESTA) report found that high-growth businesses in the UK had been more resilient than their slower-growing counterparts since 2008, meaning they have been a key driver of recovery. High-growth businesses are defined as those designed to achieve high growth and rapid profit increases (usually around 50% growth per annum) often meeting these targets with innovative product development and promotional strategies and with a pool of investors providing working capital and active oversight.

By this definition a mere 6% of UK businesses are classed as high-growth, but they created over half of all new jobs since 2007 by outperforming other forms of business enterprise, by having robust systems and products, and—through the injection of investor capital—avoiding the cash-flow problems that lead slower businesses into insolvency.  However, the drop in risk capital funding in the UK since 2008 is starting to hit these businesses too, because traditional lending structures view them as higher credit risks, often because they haven’t been around long enough to have the kind of track record that commercial financing houses see as conferring stability.

Better education a solution

Both reports focus on the need to build a skilled and creative workforce to support business growth and on improving links between businesses and educators to meet the skills gaps that have been identified.

Hiring notice by srqpix

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Family Business – the future of SMEs?

Posted by Michael under Business Growth, Entrepreneur Resources, Leadership

PricewaterhouseCoopers have just published a report that suggests over 20% of family businesses in the SME category are expecting to have new owners in the next five years – but only 7% of them expect the business to pass from one family member to another. More than 1600 small businesses in 35 countries took part in the survey.

Family businesses fail to plan and plan to fail

Future-shock can be a real issue for SMEs and demonstrates a lack of strategic planning. But by breaking down the terms we use when describing an SME, there’s a chance for small businesses to lever more finance, plan for the future and even move from small to medium by redefining what ‘family’ is.

First the bad news: many SMEs still don’t understand, or plan for, their exposure to
Capital Gains and Inheritance tax. This can cause conflict at the crux point of deciding the future direction of a small business, or add to pain and grief at a time when an SME loses its founder to death or illness. There’s also an inherent problem of managing the balance between family and firm when employing relatives in a small enterprise because if they don’t perform well, it’s difficult (but not impossible) to work within the formal business structures when evaluating their performance and working with them to improve their output.

Family firms can outperform others

On the other hand there are plus points. You can get great people to work for you, often for less or no money, because family members are willing to support and invest in a family firm – and if you bring your home-grown talent with you, you’ve got less competition out there!

On the other hand, you need to work harder to get finance because funders look much more closely at family firms, seeking exactly the kind of weakness in future planning, strategy and talent development mentioned above. One way to address this is to take your business to an international level as soon as possible – showing that you can work across national boundaries is a great way to demonstrate that you aren’t a ‘cottage industry’.

Redefine family to boost business success

Think about how you define family – what about offering a loyalty bonus to staff who’ve been with you for a period of time? If you leverage them into an equity share, involve them in ‘family’ events, make sure their birthdays and family events are as important to the company as your own: you’ve started to build an extended family where intimate confidence in and knowledge of the lives of your team can extend past blood relationships to build the kind of partnership that ensure you keep your best people and establish a small empire through talent, not kinship. That’s attractive to any funder and if those ‘family’ members decide to leave, and you can support them in establishing a subsidiary or complementary organisation, you’re on your way to hot-housing a cluster of business excellence that supports the growth of your SME without cutting into your market share.

Market stall child by Ivan Mlinaric

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